This is the twenty-third edition of weekly recommendations. Watch this space for facts, news, trivia and research around the world. Topics range from economics, public policy and psychology to finance, society and current affairs. Access all weekly recommendations here.
Politicians Live Longer
Do politicians live longer than the people they represent?
A recent article published in Qrius can shed some light on this topic.
As per the latest research (Philip Clarke, University of Oxford; An Tran-Duy, The University of Melbourne, and Laurence Roope, University of Oxford) – the life expectancy of 45-year-old politicians across all countries with available data increased by an average of 14.6 years. For the general population across the same countries, the average increase was 10.2 years.
The analysis is based on data from 11 high-income countries – Australia, Austria, Canada, France, Germany, Italy, the Netherlands, New Zealand, Switzerland, the UK and the US. The analysis contains data from around 57,000 politicians in the last two centuries.
They found that politicians can expect to live between three and seven years longer than the public. However, no specific reason can be attributed yet to such a phenomenon.
Takeaways From Oaktree’s Quarterly Review
The period from April to June 2022 changed the global economy. We started to feel the pinch of (still) ongoing Russia-Ukraine war, shortages of food, commodities and labour, increasing inflation, hawkish central banking policies and bearish financial markets.
Howard Mark’s OakTree Capital firm has published takeaways of the quarter ending June 2022. Let’s see what the managers have to say.
The economic tide has turned and as Warren Buffet would say, “It’s only when the tide goes out that you find out who’s been swimming naked”, we know how red our portfolios are. Without causing a recession the Fed has to manage its mandate of low inflation. If it fails, many companies will require restructuring of their loans. That’s why we see an attractive US public credit market (high yield bonds and leveraged loans) already. They believe that it’s a very good time to invest in these bonds in the short run as well as the long run.
They highlight that the current default rate in the US is 0.9%, lower than its historic average, but higher than the March 2022 level. With rising interest rates, the report notes, “borrowers face tighter financing conditions and slower economic growth.”
The emerging markets (EMs) have hit hard. The EM corporate bonds have fallen by 13.6% since the start of the year. It says, “Rising interest rates (a) make EM government debt more expensive to service; (b) may widen EM countries’ current account deficits, and (c) will likely make it more challenging for countries to use economic growth to improve their public and private sectors’ overstretched finances.”
The report highlights that the global supply chain transportation and infrastructure system will change. Although one can invest in logistics companies, short-term volatility in the industry cannot be overlooked. Therefore, the managers suggest targeting “hard-to-replicate transportation infrastructure assets” instead.
Nearly $800 billion is currently being spent annually on the global energy transition, according to a BloombergNEF estimate. Investors usually focus on solar energy, electric vehicles (EVs), battery storage, etc. But there’s more to it. The report says that one needs to focus on the entire electric power value chain – from generation through consumption. There’s more work that will be done in the areas apart from solar or wind energies and EVs, like – upgrading substation equipment, replacement of overhead conductors, new transformers, etc.
Note – Not my personal views. Make your investment decisions by seeking professional advice.
Layoffs in Indian Startups
Suchetana Ray, Pallavi Chakravorty and Neeraj Thakur have written an excellent piece on the impact of changing economic conditions on startup funding in the July 2022 issue of Outlook Business.
2021 was a great year for Indian start-ups. We saw the rise of 42 new unicorns. But 2022 will be different, mainly due to an increase in interest rates. The age of easy money has died and that means it will become more difficult for companies to raise money through venture capital funds as well as primary markets (i.e. IPOs).
Experience of listed Indian startups such as Zomato, Paytm and Policybazar have slowed the listing of players such as boAt, Oyo and PharmEasy. Data show that e-commerce, fintech, and SaaS (Software as a Service) based startups are ruling the VC funding in the last six months.
The article reports, “The founders have understood the harsh reality of a long winter and are finding their own ways to survive till the sun shows up again.” It also highlights the problems of overvalued firms that have high cash burn and no defined path to profitability. Some have wound their businesses while some are cutting costs.
That has an effect on the employment scenario. Startups have laid off over 10000 employees so far. Unacademy, the edtech startup was the first to severe 925 employees to cut costs. Other companies that have followed the same strategy are Vedantu, MPL, Cars24, Ola, Meesho, etc. Ronnie Screwvala, chairman of upGrad says, “The excessive funds raised by a few edtechs led to them overstaffing and spending excessively on marketing. The layoffs, primarily, are a result of that.”
Difficult times, indeed!
– Swapnil Karkare
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